Taxes are an inevitable part of business success. Business owners should plan for taxes payable to local, state and federal governments.
Understand Tax Requirements
Small businesses are subject to a number of taxes. At the local level, there could be sales taxes, property taxes, and other bills that must be paid. States may have an income tax or other taxes that are based on the size of the business. Many states also require businesses to collect sales taxes.
The federal government will require income taxes that might need to be paid by the owner or the business, depending on how the business has been legally established. In addition, if the business has employees, withholding taxes on employees’ incomes may also be required. Unemployment insurance and other levies add to the tax burden of small businesses.
All taxes have a financial cost and a requirement to devote time to the required paperwork. For a small business, it may be possible for the owner to complete all of the forms and meet recurring deadlines. However, they may not be aware of all the different requirements that a business owner faces.
Each taxing authority will have different deadlines. Payroll taxes may be due each time employees are paid, while other taxes might have to be filed monthly. Income taxes, both personal tax payments if required for the owner, and taxes payable by the business, will usually be due quarterly.
Make Sound Business Decisions
In addition to creating tasks that must be completed, taxes impact the planning process for small businesses. Even when there are tax consequences, it is important to make decisions that are in the best interest of the business. Equipment, for example, might need to be depreciated for tax purposes which would have the effect of requiring a larger initial cash outlay, but could generate more revenue and profits over the long term.
The IRS offers a great deal of information for business, but many business owners may still find it best to seek professional advice when making decisions or determining what filing requirements they face.